2023-07-28 18:30:00 ET
The S&P 500 ( SP500 ) on Friday rose 1.01% for the week to close at 4,582.23 points, posting gains in three out of five sessions. Its accompanying SPDR S&P 500 Trust ETF ( NYSEARCA: SPY ) added 1.05% for the week.
The benchmark index closed out an extremely busy week for markets, with investors receiving a deluge of quarterly results, several central bank policy decisions and key economic data.
With its advance on Friday, the S&P 500 ( SP500 ) has now posted three straight weeks of gains. Moreover, it has notched nine positive weeks in eleven, underscoring the strength of the rally in equities this year.
Fed Drops Recession Forecast
The Federal Reserve on Wednesday delivered a widely expected 25 basis point hike, bringing the federal funds rate to its highest level in 22 years. Markets believe this was the final rate hike in what has been the central bank's most aggressive tightening campaign in decades, with recent data on inflation pointing towards a moderation.
Chair Jerome Powell in his post-decision press conference said that the Fed staff was no longer forecasting a decision. He also said that the monetary policy committee would continue to take rate decisions meeting by meeting, and has not decided on a path of hiking at every other meeting. Additionally, he firmly reiterated the central bank's 2% inflation target and stressed that there would be no rate cuts this year.
"Chair Powell’s post-meeting press conference tilted a little toward the dovish side. To be sure, the one clear message Powell wished to stress was that policy is data dependent and no decisions have been made about the September FOMC or any meeting after that," JPMorgan's Michael Feroli said on Wednesday.
"The data dependence of the policy outlook was clear, but at several points it appeared as though Powell was biased toward being patient and leaving policy on hold in a restrictive stance," Feroli added.
Big Week For Central Banks
The Fed wasn't the only central bank that was in focus this week, with the European Central Bank (ECB) and the Bank of Japan (BoJ) also joining the party and issuing rate decisions.
The ECB hiked rates by 25 basis points as widely anticipated and noted that inflation was falling but was "still expected to remain too high for too long." It did not shed any light on future moves, but did raise the possibility of a potential pause in rate hikes at its next meeting.
“The ECB hiked 25bp to 3.75%, as expected. Paying a zero rate on minimum reserves was unexpected. It's a slight further tightening of the stance. The question is whether this is it for the hiking cycle. In a very slight but important tweak to the wording of the statement, the ECB has opened the door to a pause in September," Deutsche Bank's Mark Wall said on Thursday.
Meanwhile, the BoJ shocked markets on Friday by tweaking its yield curve control, in a move that was seen as the start of a shift away from ultra-loose monetary policy and coming into alignment with other major central banks.
U.S. Economic Data Shows Robust Growth, Cooling Inflation
The domestic economic calendar was quite full for the week, with a few indicators grabbing a chunk of the spotlight.
On Thursday, The Bureau of Economic Analysis said U.S. GDP grew at an annualized rate of 2.4% in Q2, almost an entire percentage point stronger than the expected figure of +1.5% and higher than the +2% growth in Q1.
On Friday, the core personal consumption expenditure price index - the Fed's favored inflation gauge - moderated on both a M/M and a Y/Y basis.
Both sets of data have bolstered bets among market participants that economic growth will remain resilient while inflation will continue to cool, and has strengthened hopes that the Fed will be able to deliver a so-called "soft landing."
In other notable data, the Conference Board's measure of consumer confidence and the University of Michigan's reading of consumer sentiment came in stronger than anticipated for July. Elsewhere, the number of Americans filing for jobless claims in the past week fell.
Earnings Blitz
This week also saw the start of the busiest part of the second quarter earnings season, with scores of heavyweight companies announcing their results. Tech titans Microsoft ( MSFT ), Alphabet ( GOOG ) ( GOOGL ) and Meta Platforms ( META ) led the way.
Microsoft ( MSFT ) stock slide on concerns over its planned spending on artificial intelligence. Conversely, Alphabet ( GOOG ) ( GOOGL ) surged to a 15-month high after the Google-parent's quarterly report showed modest but steady growth on the back of advertising revenues of nearly $60B. Meta ( META ) stock also jumped after Wall Street heaped praise on the social media firm's Q2 results and guidance.
Several Dow 30 components were also on the earnings docket this week:
- Industrial bellwether 3M ( MMM ) posted a healthy jump in Q2 cash flow and raised its full year profit guidance;
- Telecom major Verizon ( VZ ) maintained its full year earnings forecast amid worries about lead cable liabilities;
- Card issuer Visa ( V ) was helped by robust consumer spending and a continuing recovery in travel;
- Top planemaker Boeing ( BA ) turned in a narrower quarterly loss;
- Price increases helped soft drink maker Coca-Cola ( KO ) smash organic revenue expectations;
- Fast food giant McDonald's ( MCD ) topped comparable sales estimates in all regions;
- Industrial conglomerate Honeywell's ( HON ) quarterly revenue came in below consensus;
- A considerable drop in oil and gas prices from a year ago contributed to the fall in Chevron's ( CVX ) top and bottom line;
- Intel's ( INTC ) results pointed towards signs of a recovery in the PC market.
Weekly Sector Performance
Turning to the weekly performance of the S&P 500 ( SP500 ) sectors, seven ended in the green, with Communication Services leading the table via an outsized advance of nearly 7%. Rate-sensitive sectors Utilities and Real Estate topped the losers. See below a breakdown of the performance of the sectors as well as their accompanying SPDR Select Sector ETFs from July 21 close to July 28 close:
#1: Communication Services +6.85% , and the Communication Services Select Sector SPDR Fund ( XLC ) +4.96% .
#2: Materials +1.81% , and the Materials Select Sector SPDR ETF ( XLB ) +1.81% .
#3: Energy +1.68% , and the Energy Select Sector SPDR ETF ( XLE ) +1.84% .
#4: Information Technology +1.27% , and the Technology Select Sector SPDR ETF ( XLK ) +1.03% .
#5: Consumer Discretionary +1.21% , and the Consumer Discretionary Select Sector SPDR ETF ( XLY ) +1.04% .
#6: Consumer Staples +0.72% , and the Consumer Staples Select Sector SPDR ETF ( XLP ) +0.62% .
#7: Industrials +0.56% , and the Industrial Select Sector SPDR ETF ( XLI ) +0.56% .
#8: Financials -0.24% , and the Financial Select Sector SPDR ETF ( XLF ) -0.17% .
#9: Health Care -0.85% , and the Health Care Select Sector SPDR ETF ( XLV ) -0.78% .
#10: Real Estate -1.80% , and the Real Estate Select Sector SPDR ETF ( XLRE ) -1.84% .
#11: Utilities -2.10% , and the Utilities Select Sector SPDR ETF ( XLU ) -2.07% .
Below is a chart of the 11 sectors' YTD performance and how they fared against the S&P 500 ( SP500 ). For investors looking into the future of what's happening, take a look at the Seeking Alpha Catalyst Watch to see next week's breakdown of actionable events that stand out.
More on the markets
- Intel results, soft inflation data boost S&P, Dow; Nasdaq posts best day since late May
- Bond Market Roundup: Yields rise on the week and the yield curve tightens
- See a correction? Insurance against S&P losses is now the cheapest ever
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S&P 500 ends eventful week of non-stop earnings, central bank decisions with +1% gain